Wealth tax

Businessman’s hand pointing to a wooden model of a house while writing on paper

Wealth tax (IP)

Property tax is one of the least popular taxes among taxpayers, and is one that does not exist in many countries. It is applied to both tax residents and non-residents in Spain, although most people do not have to present a return for this tax a minimum amount exempt from this tax.

The Wealth Tax is an annual charge that taxes the net wealth of natural persons on 31 December of each year, although it is declared, if applicable, several months later.

This is an individual tax and therefore does not allow joint tax returns with a spouse or a family unit. If you have jointly owned assets, you have to declare the amount that corresponds to your share.

What does it tax?

In order to calculate a person's net wealth, the value of all the assets and rights the person owns is taken into consideration, that is the total value of all the assets and the value of the charges and taxes deducted from those assets are subtracted from that amount, as well as the debts or personal obligations to which the person must respond, including the amount pending repayment on a mortgage.

Broadly speaking, the assets and rights that are included are real estate, money held in banks, shares and/ or stakes in companies, cars, boats, jewellery, works of art, etc. Certain debts are deductible, e.g. mortgage amounts outstanding at 31 December.

If you are a tax resident in Spain, the Wealth Tax is applied to the goods and rights you have worldwide.

However, if you are not a tax resident in Spain or if you qualify for the Beckham Act, it is only applied to the assets and rights that you have in Spain. Therefore, the assets and rights you have in other countries are not taken into account.

Although some autonomous communities have suspended the collection of wealth tax, in Catalonia it is still in force.

Is there a minimum amount exempt from taxation?

In general, tax residents in Spain whose net wealth is under €700,000 (€500,000 in Catalonia) do not have to present this tax return.

However, natural persons who are taxed under the IRNR or are subject to the Beckham Act will only pay the Wealth Tax if they have net worth located in Spain in excess of €700,000. This is the exemption limit for non-residents from both EU and non-EU countries.

In other words, non-resident taxpayers (whether EU or non-EU) can benefit from the state exemption of 700,000 euros and not the regional exemption (e.g. 500,000 euros in the case of Catalonia), which represents a tax saving.

It should be noted that only those considered tax residents are entitled to an additional reduction of up to €300,000 on the value of the property which constitutes their main residence.

What are the applicable tax rates?

On the basis of net assets, fixed rates plus tax rates expressed as a percentage are applied. These general rates vary between 0.2 and 3.5%. However, for residents in Catalonia, the applicable minimum rate is 0.21% and the marginal rate, i.e. the highest, is 3.48%.

For further information

Finally, please remember that all the information contained in this document applies to natural persons (individuals), because legal persons (companies) pay tax under their own taxation rules. Therefore, if you want to set up a new company in Barcelona or, for example, establish a branch of a foreign company, we advise you to consult the relevant information with specialists.

Consult the various Public Tax Offices concerned: